Robertson Foundation lawsuit Q&a updated December 18, 2008
Is there any allegation that any University-designated trustee acted for his or her own personal benefit?
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- 16. Did the donor intend to give Princeton control over the Robertson Foundation
- 17. Did the donor retain any control over the Robertson Foundation
- 18. What does it mean for the Robertson Foundation to be a “supporting organization”
- 19. How did the Robertson Foundation become a supporting organization
15. Is there any allegation that any University-designated trustee acted for his or her own personal benefit?No. There has never been any allegation whatsoever that any current or former University-designated trustee ever derived a financial gain from service to the Robertson Foundation. (The trustees are not even compensated for their service on the board.) Although plaintiffs and their counsel frequently invoke the rhetoric of “fraud” and “theft,” there are no allegations that any Foundation funds were ever diverted to any University-designated trustee or away from Princeton University. Foundation Control 16. Did the donor intend to give Princeton control over the Robertson Foundation?Yes. As an incorporator of the Foundation, Mrs. Robertson gave Princeton control over the Robertson Foundation in part to obtain the significant tax advantages that flowed from her donation. In seeking a ruling from the Internal Revenue Service, Mrs. Robertson's and Princeton's representatives emphasized that the gift to the Foundation should qualify for both income and gift tax deductions because Mrs. Robertson was relinquishing control to a public charity and the gift was ultimately “to or for the use of Princeton University” and the Foundation would be under Princeton’s control. [Documents: President Goheen's May 1, 1961 Letter and Excerpt from the May 4, 1961 Myers Memorandum] Since its inception, Princeton’s control of the Robertson Foundation was established through several provisions in the Certificate of Incorporation and bylaws. [Document: Excerpt from the Foundation Bylaws] The Certificate provides that if the Foundation should be dissolved, the “Board of Trustees shall distribute or transfer the property and funds of the corporation . . . to Princeton University.” Only if Princeton University loses its section 501(c)(3) tax exemption, thereby ceasing to be “an exempt organization,” can the Foundation’s assets be made available to another beneficiary. [See: Question 3] [Document: Excerpt from the Foundation Certificate of Incorporation] For an overview of a number of the key issues in this dispute, see Robertson v. Princeton -- Perspective and Context, prepared by Victoria B. Bjorklund. Ms. Bjorklund is a member of the law firm Simpson Thacher & Bartlett LLP, which, together with Lowenstein Sandler PC, serves as litigation counsel to Princeton University and the individual defendants in the Robertson litigation. 17. Did the donor retain any control over the Robertson Foundation?No. Princeton's control enabled Mrs. Robertson to enjoy income tax and gift tax benefits, which the donor would not have enjoyed had she controlled the Foundation. Mrs. Robertson completely relinquished any right to the assets she donated to the Foundation. The governance structure for the Foundation provided that a majority of the positions on the board would be appointed by the University and a minority of the positions on the board (three out of seven) would be appointed by the Robertson family. This structure is consistent with the Foundation's status as a 509(a)(3) supporting organization. Mrs. Robertson’s husband, Charles, served as a trustee and president of the Foundation from its creation in 1961 until his death in 1981. One of the current plaintiffs, her son William, joined the board in 1974 and another, Robert Halligan, joined in 1982. Foundation Tax Structure 18. What does it mean for the Robertson Foundation to be a “supporting organization”?In 1969, Congress amended the Internal Revenue Code to add section 509, which classified 501(c)(3) exempt organizations into two categories: public charities and private foundations. By the 1969 amendment, Congress also created a new sub-category of public charities known as “supporting organizations.” A “supporting organization” is “operated, supervised, or controlled by” another public charity (a Type I supporting organization), “supervised or controlled in connection with” another public charity (Type II) or “operated in connection with” another public charity (Type III). According to the Internal Revenue Service: “The key feature of a supporting organization is a strong relationship with an organization it supports. The strong relationship enables the supported organization to oversee the operations of the supporting organization.” [Document: Excerpt from IRS Website] There are approximately 45,000 supporting organizations in the United States. [See: www.nptrust.org/philanthropy/philanthropy_stats.asp] The Robertson Foundation is a Type I supporting organization, “operated, supervised, or controlled by” Princeton. This means that by requirement and by design the Robertson Foundation exists solely to support Princeton, and its governance structure is tightly bound up with Princeton University. For an overview of a number of the key issues in this dispute, see Robertson v. Princeton -- Perspective and Context, prepared by Victoria B. Bjorklund. Ms. Bjorklund is a member of the law firm Simpson Thacher & Bartlett LLP, which, together with Lowenstein Sandler PC, serves as litigation counsel to Princeton University and the individual defendants in the Robertson litigation. 19. How did the Robertson Foundation become a supporting organization?In 1970, following the enactment of the Tax Reform Act of 1969, the Robertson Foundation requested classification as a public charity by reason of being a supporting organization controlled by the University within the meaning of section 509(a)(3) of the Internal Revenue Code. In its application to the IRS, the Foundation described its relationship to Princeton and in particular Princeton’s “control” over the Foundation. Charles Robertson, the donor’s husband and president of the Foundation, represented to the IRS that the Foundation should be classified as a “supporting organization” of Princeton University because:
Charles Robertson’s representations to the government are available here: [Document: Excerpt from Charles Robertson's August 20, 1970 Notification Concerning Foundation Status]. By letter dated November 9, 1970, the IRS classified the Foundation as a public charity (i.e., “an organization that is not a private foundation as defined in section 509(a) of the Internal Revenue Code”). [Document: IRS Letter] Download 180.02 Kb. Share with your friends:
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